As Vietnam strengthens its position as an attractive destination for foreign investment, driven by a dynamic, skilled and affordable workforce, HR compliance has become a key pillar of effective business strategy. Navigating the local regulations can be complex, but Adecco Vietnam is here to provide the expertise you need. We support businesses in understanding and complying with Vietnam’s labour landscape, empowering you to focus on business performance and strategic goals.
HUMAN RESOURCES IN VIETNAM
Employment contract
Labor contracts must be in writing and follow one of two types:
• indefinite-term contracts (unlimited duration)
• definite-term contracts (up to 36 months)
Contracts must be in writing (with verbal contracts permitted for terms under one month), prepared in two copies (one for each party), and include essential employment terms such as job description, workplace, salary, working hours, occupational safety, and social insurance provisions.
Probation period
The probation period is a crucial stage in the hiring process, giving both employers and employees an opportunity to assess if the position is a good fit before committing to a long-term employment.
A written agreement is required, and the duration of the probation period can vary based on the skills and qualifications needed:
• Up to 180 days for enterprise managers
• Up to 60 days for positions requiring professional or technical qualifications from college or higher
• Up to 30 days for roles requiring intermediate professional qualifications
• Up to 6 days for all other jobs
Salary during probation must be at least 85% of regular position salary. Either party can terminate without notice during this period.
Termination
Employees have the right to unilaterally end their employment contracts, as long as they follow the notice period based on their type of contract. In certain cases, such as incorrect job assignments, employer abuse, or workplace sexual harassment, termination can be made without notice.
For employers, unilateral termination is more restricted. Termination is only allowed under specific conditions, with proper notice, such as when an employee reaches retirement age, or consistently underperforms according to the employment contract, etc. An exception allows employers to terminate a contract without prior notice if an employee is absent for five consecutive days without a valid reason.
Working hours
Under the Vietnam Labour Code, standard working hours should not exceed 8 hours per day or 48 hours per week. Employers have the flexibility to set daily or weekly working hours, as long as the total does not exceed 10 hours per day or 48 hours per week.
Overtime
Overtime hours are subject to specific limitations to ensure employee well-being. Overtime cannot exceed 50% of daily working hours. For those on a weekly schedule, the total of normal working hours and overtime must not surpass 12 hours in a single day and 40 hours in a month. Additionally, employers must ensure that the annual overtime limit is 200 hours, except in specified circumstances.
Overtime compensation rates:
• Weekdays (daytime): 150% of the regular salary
• Weekends (daytime): 200% of the regular salary
• Public holidays and paid leave days: 300% of the regular salary
Employees working at night shall be paid at least 130% of their regular hourly wage.
For those who work overtime at night, in addition to the above overtime pay, they will receive an extra 20% of salary based on the job performed during regular working hours, weekends, or public holidays.
Work Permit
Foreigners who work in Vietnam are required to obtain a Work Permit or a Work Permit Exemption from the Department of Labour before beginning employment.
The employment contract duration cannot exceed the validity period of the Work Permit. Each Work Permit is specific to the position and employer, meaning a new Work Permit is required if the employee changes positions within the same company or moves to a different employer, as the original permit becomes invalid.
PAYROLL IN VIETNAM
Base salary
Base salary at VND2,340,000, which is also known as the general minimum salary, applies to the calculation of salaries for individuals working in the state sector, including cadres, civil servants, public employees, and employees working under labour contracts for state agencies and the armed forces.
Minimum wages
In Vietnam, the minimum salary varies by 4 regions to match the cost of living. The Government sets the minimum wage and adjusts it regularly as the efforts to improve living standards and fair pay across the country.
Contributions
Employees and employers, whether domestic or international, must participate in three types of mandatory social security in Vietnam: social insurance (SI), health insurance (HI) and unemployment insurance (UI).
(*) For businesses operating in industries with a high risk of occupational accidents and diseases, the unemployment insurance premium is 0.3% if eligible and approved by the Ministry of Labor, Invalids, and Social Affairs.
Contributions are determined based on employees’ monthly salary as stipulated in the employment contract (capped at 20 times the base salary for SI and HI; and 20 times the regional minimum wage for UI).
Trade Union
The Vietnam Trade Union (TU) is the only organisation that has the right to represent and protect the lawful rights and interests of employees. TU is established voluntarily, organised, and operates on the principle of democratic centralism.
The contribution rate to trade union funds is set at 2% of the salary fund for Social Insurance contributions for employees. This payment is required regardless of whether the enterprise has established a grassroots trade union.
TU fees are paid by employees who choose to join the grassroots TU in their organisation. If employees do not join the union or if the enterprise does not establish a grassroots trade union, this fee is not required.
Personal Income Tax
Individuals are subject to Personal Income Tax (PIT) based on their income type and tax residency status: tax resident or non-tax resident. Non-tax residents are taxed at a flat rate of 20% on Vietnam-sourced income, while tax residents are subject to PIT under progressive rates on worldwide employment income, regardless of where the income is paid.
Employers are responsible for withholding and pay PIT to Tax Department on behalf of employees.
About Adecco Vietnam
Established in Vietnam in 2011, Adecco Vietnam – a member of The Adecco Group - is the leading Payroll, Recruitment & Outsourcing Agency in Vietnam. We provide one-stop solutions for all Human Resources needs. Operating for more than 60 years, The Adecco Group has 39,000+ passionate employees in 5,000+ branches across 60 countries and territories worldwide.
Website: adecco.com.vn